IMPACT OF
ECONOMIC
ENVIRONMENT ON
BUSINESSES
THE BUSINESS ENVIRONMENT – UNIT 1
,BTEC Level 3 90 Credit Diploma, Business 21.11.2016
Contents
Introduction............................................................................................................................. 2
About BP................................................................................................................................ 2
Influence of economic environments on BP business activities..............................................2
Economic factors................................................................................................................2
United Kingdom...............................................................................................................2
India................................................................................................................................ 7
Global Interaction.............................................................................................................. 10
Challenges faced in these economic environments..............................................................12
References........................................................................................................................... 14
U1 [P5, M2] 1
, BTEC Level 3 90 Credit Diploma, Business 21.11.2016
Introduction
This report looks at the impact of the economic environment on a business; BP in particular.
It will describe how BP’s activities and operations are influenced by two contrasting
economic environments, which are those of India and the United Kingdom. It then goes on to
compare the challenges to these activities within the company in the two different countries.
About BP
BP is a global leading oil and gas company, with operations in over 70 countries, that is
mainly known for providing customers with fuel. They also provide energy for heat and light,
lubricants for engines and petrochemicals products, which are used in the manufacturing of
many different items such as paints, clothes and packaging.
BP’s main aim is to create value for investors and benefit the communities in which they
operate. They plan to achieve this by setting distinguished priorities, managing a quality
portfolio, distributing globally and employing their unique capabilities. Another method that
they use to reach their goals is growing sustainable free cash flow, which can be defined as
more revenue continuously coming into the business. This helps a company stay afloat
despite its expenses and changes in the economy.
Influence of economic environments on BP business activities
There are a number of external factors that can have a major impact on the economic
environment in a country and it turn, the businesses in it. BP has no control over these
changes and needs to adapt to them, which can have a significant influence on strategies
and operations. The factors that will be examined can be categorised under economic and
global interaction within both BP India and BP UK.
Economic factors
The economic environment consists of the millions of decision makers in a particular
country; consumers and suppliers, borrowers and lenders and those responsible for raising
taxes and changing interest rates. Although these are all individual decision makers, there
are certain patterns that can be seen in relation to the decisions made.
Stable economic conditions in India and the UK are very important to BP as they allow the
company to be able to make predictions regarding demand for their products in the near
future. There is also more security and reassurance that people who are supplied on credit
will pay back the full amount due on time.
United Kingdom
Stability
Britain’s economy has been relatively stable in the past couple of years, but things have
taken a turn as of June this year when the EU referendum took place. The public voted for
Brexit, which refers to the UK leaving the European Union and this has significantly
challenged stability in the country. There is a lot of uncertainty and commotion as to what is
going to happen, how laws and regulations are going to change and the effect on the single
market and trade. For one, the pound plunged right after the vote and has been unsteady
ever since. According to the Bank of England, the EU referendum is “the most significant
near-term domestic risk to financial stability”. As a result, businesses could decide to
relocate major operations elsewhere in order to maintain access to the single market.
U1 [P5, M2] 2
ECONOMIC
ENVIRONMENT ON
BUSINESSES
THE BUSINESS ENVIRONMENT – UNIT 1
,BTEC Level 3 90 Credit Diploma, Business 21.11.2016
Contents
Introduction............................................................................................................................. 2
About BP................................................................................................................................ 2
Influence of economic environments on BP business activities..............................................2
Economic factors................................................................................................................2
United Kingdom...............................................................................................................2
India................................................................................................................................ 7
Global Interaction.............................................................................................................. 10
Challenges faced in these economic environments..............................................................12
References........................................................................................................................... 14
U1 [P5, M2] 1
, BTEC Level 3 90 Credit Diploma, Business 21.11.2016
Introduction
This report looks at the impact of the economic environment on a business; BP in particular.
It will describe how BP’s activities and operations are influenced by two contrasting
economic environments, which are those of India and the United Kingdom. It then goes on to
compare the challenges to these activities within the company in the two different countries.
About BP
BP is a global leading oil and gas company, with operations in over 70 countries, that is
mainly known for providing customers with fuel. They also provide energy for heat and light,
lubricants for engines and petrochemicals products, which are used in the manufacturing of
many different items such as paints, clothes and packaging.
BP’s main aim is to create value for investors and benefit the communities in which they
operate. They plan to achieve this by setting distinguished priorities, managing a quality
portfolio, distributing globally and employing their unique capabilities. Another method that
they use to reach their goals is growing sustainable free cash flow, which can be defined as
more revenue continuously coming into the business. This helps a company stay afloat
despite its expenses and changes in the economy.
Influence of economic environments on BP business activities
There are a number of external factors that can have a major impact on the economic
environment in a country and it turn, the businesses in it. BP has no control over these
changes and needs to adapt to them, which can have a significant influence on strategies
and operations. The factors that will be examined can be categorised under economic and
global interaction within both BP India and BP UK.
Economic factors
The economic environment consists of the millions of decision makers in a particular
country; consumers and suppliers, borrowers and lenders and those responsible for raising
taxes and changing interest rates. Although these are all individual decision makers, there
are certain patterns that can be seen in relation to the decisions made.
Stable economic conditions in India and the UK are very important to BP as they allow the
company to be able to make predictions regarding demand for their products in the near
future. There is also more security and reassurance that people who are supplied on credit
will pay back the full amount due on time.
United Kingdom
Stability
Britain’s economy has been relatively stable in the past couple of years, but things have
taken a turn as of June this year when the EU referendum took place. The public voted for
Brexit, which refers to the UK leaving the European Union and this has significantly
challenged stability in the country. There is a lot of uncertainty and commotion as to what is
going to happen, how laws and regulations are going to change and the effect on the single
market and trade. For one, the pound plunged right after the vote and has been unsteady
ever since. According to the Bank of England, the EU referendum is “the most significant
near-term domestic risk to financial stability”. As a result, businesses could decide to
relocate major operations elsewhere in order to maintain access to the single market.
U1 [P5, M2] 2
